All Green Ahead

It is not easy to say. Most data on automotive workforce evolution refers to the industry as a whole, making it difficult to tell green from brown, i.e., the ones who have seen the new signposts from the ones sticking to their cylinders.

Until now, that is. Moritz Goldbeck and a team comprising his colleague Oliver Falck, both from  ifo/University of Munich, Thomas Fackler from the University of Surrey, and Fabian Hans and Annina Hering from the manpower firm Indeed came up with a clever way to gain a detailed view of how things stand. They report their findings in their latest CESifo Working Paper.

Their rationale is that labour demand is highly elastic, meaning that firms react quickly by scaling it flexibly as circumstances change, and that the best way to gauge labour demand in real-time is by perusing online job adverts. They then combine this data with patent portfolios at the firm level to create an index for greenness in firm-level labour demand at German automotive companies.

They also take advantage of the fact that Germany’s automotive industry has faced a string of crises in recent years, and crises are a good catalyst for change, since they present an opportunity to alter employment because pressure to act as well as stakeholder and public acceptance of structural change is higher. The crises have ranged from a couple of scandals like “Dieselgate”, to escalating trade conflicts, the pandemic, supply chain disruptions, exploding energy prices and, now and forever more, the pressure of curbing carbon emissions. The latter has prompted a massive irruption of electric vehicles into the market that is posing arguably the most momentous challenge to the industry ever.

Here is the rub. Incumbents are faced with the choice between transitioning to green technology to remain competitive in the long term—or maximizing short-term profits by selling combustion technology as long as possible while scrimping on investment. You can be excused for thinking that the latter sounds like a Kodak moment.

Another hurdle is the perceived dilemma between environmental goals and employment, which posits that the green transformation will wipe out many well-paying jobs tied to internal-combustion cars. That may well be true, but it is increasingly clear that avoiding structural change will compound the risk of new green competitors establishing dominant market positions on the EV market, ultimately endangering incumbents’ survival. In other words, while a combustion-technology focus can be profitable in the short term, sustaining employment in the long term might only be achieved by following a green strategy, transitioning to a new business model, and adjusting the workforce’s skills accordingly.

This last point was the focus of our researchers’ work. Armed with the online job advert data spiked with patent filings, they set out to pin down the size of whatever green shoots German automotive firms were sprouting.

They found that the labour demand of green firms, defined as those pursuing battery-electric, hybrid, or fuel-cell technologies, compared to brown ones, i.e., those tied to combustion technology, has been significantly and persistently higher throughout the series of crises. On average, green firms feature 34 to 50 percentage points more postings than brown firms do, compared to before the pre-crisis period. What’s more, the gap in labour demand between green and brown firms widens over time, from about 20 percentage points at the beginning of the crisis streak to almost 60 percentage points by the end of 2023. Since then, the gap shrinks again to a still very significant 35 percentage points.

Moreover, the labour demand adjustment in response to the crises is structurally different between green and brown firms. Compared to the pre-crisis trend, green firms’ labour demand has increased especially strongly in information technology and production, and less for technical and traditional engineering roles. Overall, the authors’ findings suggest a persistent outperformance of green relative to brown firms in the German automotive industry with respect to labour demand and structural employment adjustments triggered by the crises.  

So there you have it. A good chunk of the German automotive industry is firmly headed for greener pastures, while some diehards still cling to the lovely, full-throated engines that they spent so many years perfecting, stuck in place even after the light has turned green.